-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GiDYx35TkddjVN8Um06ry9QiAs3gBs1dkb+MKA8a9jOuN6RFbgt7RQr820BKlvPz 0bWfN6+YKfTXlDknbTrPSw== 0000008919-96-000004.txt : 19960814 0000008919-96-000004.hdr.sgml : 19960814 ACCESSION NUMBER: 0000008919-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AYDIN CORP CENTRAL INDEX KEY: 0000008919 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 231686808 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07203 FILM NUMBER: 96611159 BUSINESS ADDRESS: STREET 1: 700 DRESHER RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2156577510 10-Q 1 AYDIN CORPORATION Telephone 700 Dresher Road (215) 657-7510 P.O. Box 349 FAX Horsham, PA 19044 (215) 657-3830 U.S.A. August 13, 1996 (VIA EDGAR) SECURITIES & EXCHANGE COMMISSION Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549-1004 Attn: Filing Desk, Stop 1-4 RE: Form 10-Q Second Quarter 1996 File No. 1-7203 Gentlemen: We are enclosing for filing Aydin Corporation's Form 10-Q for the Second Quarter ending June 29, 1996. Sincerely, /s/ Robert A. Clancy Robert A. Clancy Secretary and Corporate Counsel PAGE SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended _______June 29, 1995______________ OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _________________ Commission file number ________1-7203_________________________________ AYDIN CORPORATION ______________________________________________________________________ (Exact name of registrant as specified in its charter) DELAWARE 23-1686808 ______________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 DRESHER ROAD, HORSHAM, PA 19044 ______________________________________________________________________ (Address of principal executive offices) (Zip Code) (215) 657-7510 ______________________________________________________________________ (Registrant's telephone number, including area code) ______________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of common stock, $1.00 par value, outstanding as of August 13, 1996 5,133,400 AYDIN CORPORATION PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Attached are the Condensed Consolidated Financial Statements of Aydin Corporation and the related Note. These condensed consolidated financial statements for the three and six month periods ended June 29, 1996 have been subjected to a limited review by Grant Thornton LLP, the Registrant's independent accountants, whose report is attached. Earnings per share are based on the weighted average number of common shares outstanding plus shares issuable upon the assumed exercise of dilutive common stock options except for loss periods where their effect would be antidilutive. The number of shares used in the computation of earnings per share for the three months ended June 29, 1996 and July 1, 1995 were 5,121,961 and 5,091,372, respectively, and for the six-month periods then ended 5,118,671 and 5,001,563, respectively. AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($000 omitted except for per share amounts)
Three Months Ended Six Months Ended 6/29/96 7/01/95 6/29/96 7/01/95 (Unaudited) (Unaudited) NET SALES $ 26,706 $ 36,494 $ 62,989 $72,082 COST AND EXPENSES Cost of sales 25,228 26,661 50,536 52,598 Selling, general and administrative 8,289 6,221 15,389 12,745 Research and development 2,321 1,772 4,551 3,221 Interest expense, net 220 175 424 18 _______ _______ _______ _______ Total 36,058 34,829 70,900 68,582 _______ _______ _______ _______ INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) AND MINORITY INTEREST (9,352) 1,665 (7,911) 3,500 INCOME TAXES (BENEFIT) (2,232) 581 (1,760) 1,217 _______ _______ _______ _______ INCOME (LOSS) BEFORE MINORITY INTEREST (7,120) 1,084 (6,151) 2,283 LESS MINORITY INTEREST (96) 11 (90) 19 _______ _______ _______ _______ NET INCOME (LOSS) (7,024) $ 1,073 $ (6,061) $ 2,264 _______ _______ _______ _______ _______ _______ _______ _______ EARNINGS (LOSS) PER SHARE ($ 1.37) $ .21 ($ 1.18) $ .45 _______ _______ _______ _______ _______ _______ _______ _______
AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) ASSETS
June 29, 1996 Dec. 31, 1995 (Unaudited) CURRENT ASSETS: Cash, including cash equivalents- 1996, $1,180; 1995, $3,569 $ 2,099 $ 4,638 Restricted cash 7,721 11,672 Accounts receivable 34,532 53,216 Unbilled revenue, after 46,941 46,927 progress billings Inventories: Raw materials 11,295 11,581 Work-in-process 7,746 7,965 Finished product 3,595 3,234 Prepaid expenses 1,494 1,577 ________ ________ Total current assets 115,423 140,810 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation: 1996, $59,510; 1995, $59,055 24,902 25,624 OTHER ASSETS 426 426 ________ ________ TOTAL ASSETS $140,751 $ 166,860 ________ ________ ________ ________ __________________________________________________________________
AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000 Omitted) LIABILITIES AND STOCKHOLDERS' EQUITY
June 29, 1996 Dec. 31, 1995 (Unaudited) CURRENT LIABILITIES: Current maturities of long-term debt $ - 0 - $ 342 Short-term bank debt 5,414 5,486 Accounts payable 18,592 29,222 Accrued liabilities 7,512 7,370 Advanced payments and contract billings in excess of recognized revenue 3,263 2,843 Accrued and deferred income taxes 1,681 9,932 ________ _______ Total current liabilities 36,462 55,195 LONG-TERM DEBT, less current maturities -0- 770 DEFERRED INCOME TAXES 5,677 6,232 MINORITY INTEREST -0- 90 STOCKHOLDERS' EQUITY: Common stock, par value $1- authorized 7,500,000 shares: issued 1996, 5,125,900 shares; 1995, 5,112,127 shares 5,126 5,112 Additional paid-in capital 2,356 2,188 Retained earnings 91,822 97,883 Foreign currency translation effects (692) (610) ________ _______ Stockholders' equity 98,612 104,573 ________ _______ TOTAL LIABILITIES AND EQUITY $140,751 $166,860 ________ _______ ________ _______
AYDIN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000 omitted)
Six Months Ended June 29, 1996 July 1, 1995 (Unaudited) (Unaudited) OPERATING ACTIVITIES Net Income (Loss) $ (6,061) $ 2,264 Items not affecting cash: Depreciation and amortization 1,603 1,608 Deferred income taxes 300 200 Minority Interest (90) 19 Gain on sale of facility (216) -0- Other (82) 12 Changes in certain working capital items: Accounts receivable 18,684 1,021 Unbilled revenue (14) (10,645) Advance payments and contract billings in excess of recognized revenue 420 (1,960) Inventories 144 (277) Prepaid expenses 83 3 Accounts payable and accrued liabilities (10,488) 347 Accrued income taxes (9,106) (226) ________ _________ Cash (Used) By Operating Activities (4,823) (7,634) INVESTING ACTIVITIES Net property, plant and equipment additions (1,824) (1,378) Proceeds from sale of 1,159 -0- facility ________ _________ Cash (Used) By Investing Activities (665) (1,378) FINANCING ACTIVITIES Release of collateral on restricted cash 3,951 7,220 Principal payments on long-term debt (1,112) (723) Net repayments of short-term borrowings (72) (1,000) Purchase of Treasury Shares -0- (58) Minority investment in consolidated subsidiary -0- 103 Proceeds from exercise of stock options 182 391 ________ _________ Cash Provided By Financing Activities 2,949 5,933 ________ _________ DECREASE IN CASH AND CASH EQUIVALENTS (2,539) (3,079) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,638 9,771 ________ _________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,099 $ 6,692 ________ _________ ________ _________
NOTE TO FINANCIAL STATEMENTS: Interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the periods. The 1995 balance sheet has been derived from the audited financial statements contained in the 1995 Annual Report to Stockholders. These interim financial statements conform with the requirements for interim financial statements and consequently do not include all the disclosures normally required by generally accepted accounting principles. Reporting developments have been updated where appropriate. In this connection, there are changes in contingency disclosures as disclosed in Part II, Item I, "Legal Proceedings." The Company's liquidity and financial flexibility continues to be adversely affected by amounts due from the Government of Turkey. Pretax income for the six months includes foreign currency translation gains relating to the Turkish subsidiary of $456,000 for 1996 and $169,000 for 1995. INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION Board of Directors and Stockholders Aydin Corporation We have reviewed the condensed consolidated balance sheets of Aydin Corporation and subsidiaries as of June 29, 1996, and the related condensed consolidated statements of operations and cash flows for the six month periods ended June 29, 1996 and July 1, 1995 in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these condensed consolidated financial statements is the representation of the management of Aydin Corporation and subsidiaries. A review of interim financial information consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1995, and the related consolidated statements of operations and cash flows for the year then ended (not presented herein) and in our report dated February 26, 1996, except as to Note A for which the date is March 22, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995 is fairly stated, in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ Grant Thornton LLP Philadelphia, Pennsylvania August 7, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) Material Changes in Financial Condition (6/29/96 versus 12/31/95) Accounts receivable decreased by $18.7 million primarily because of approximately $17 million of collections during the first half on the TMRC Contract with the Government of Turkey. Most of these collections were for the software on this contract, the acceptance for which had been delayed in excess of one year as of 12/31/95. Accounts payable decreased by $10.6 million primarily because of payment of approximately $8 million to the TMRC software subcontractor. Current accrued and deferred income taxes decreased by $8.3 million primarily because of $6.4 million of payments made to the IRS and the income tax benefit resulting from the first six months pre-tax losses. Long-term debt (including current maturities) consisting of mortgages of $1.1 million was paid off during the first quarter, and the properties involved were used as collateral against a $4.5 million line of credit. As of 6/29/96, $4.0 million of this line of credit was used. The Company is currently in negotiations to put in place additional borrowing facilities. The $7.7 million of restricted cash at 6/29/96 was being held as collateral by a bank against the TMRC contract. The Company's liquidity and financial flexibility continued to be adversely affected during the first half by amounts still due from the Government of Turkey. Based on recently concluded agreements negotiated with the customer, the Company believes that most of the payment delays have now been resolved. Based on the present backlog and projected cash flows, the Company anticipates financing its capital needs from internal sources and additional borrowings. (2) Material Changes in Operations (2nd Quarter and Six Months 1996 versus 1995) Net sales for the quarter decreased to $26.7 million from $36.5 million a year ago, a 27% decline. The lower sales reflects the decline in backlog from $123 million a year ago to $94 million at 6/29/96 in addition to sales reductions caused by a cost overrun on a major contract and a contract value reduction because of delays in completing the TMRC contract. Although additional cost overruns and contract value reductions are not expected, the reduced sales level is anticipated for the balance of the year as new management strives to rebuild the backlog. The net sales decline for the six months results almost entirely from the decreased sales of the second quarter. Cost of sales for the quarter as a percentage of sales increased to 94.5% from 73.1%, primarily because of the aforementioned cost overrun and contract value reductions in addition to provisions for inventory obsolesence and write downs of inventory to net realizable value. The increase in cost of sales as a percentage of sales for the six months results almost entirely from the increases of the second quarter. Selling, general and administrative expenses increased by $2.1 million (34%) in the second quarter and $2.6 million (21%) in the six months. These increases resulted primarily from higher proposal costs, increased bad debts provisions and higher Argentine subsidiary S, G & A expenses. Research and development costs increased by $549 thousand (31%) in the quarter and $1.3 million (41%) in the six months because of increased new product development in telecommunications and telemetry product lines. Interest expense (net of interest income) increased by $406 thousand for the six months because of interest expense on taxes owed to the IRS and lower interest income at the Turkish subsidiary due to lower cash balances during 1996. The effective income tax rates for the second quarter were a benefit of 23.9% for 1996 and a 34.9% rate for 1995. The effective rates for the six months were a benefit of 22.2% for 1996 and a 34.8% income tax rate for 1995. The lower rates for 1996 are primarily the result of foreign income (taxed at a higher rate than US income) being a smaller portion of 1996 pretax results than in 1995. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to Item 3, "Legal Proceedings," in Registrant's Annual Report on Form 10-K, Part I, for the year ended December 31, 1995, regarding the arbitration cross claims of Loral Defense Systems-Eagan ("Loral") and Registrant. On June 13, 1996, Loral filed an Amended Arbitration Demand, increasing its claim from $12.4 million to $18.4 million. On July 23, 1996, Registrant filed its Response to Loral's Amended Demand denying all of Loral's claims and filed its own Amended Arbitration Counterclaim Demand, seeking in excess of $65 million for Loral's misconduct in the performance of the subcontract between Registrant and Loral. The parties are in the process of selecting a panel of three arbitrators. The Registrant believes that it has meritorious defenses and counterclaims to Loral's claim. The American Arbitration Association has established dates for the exchange of documents, completion of depositions and exchange of Pre- Hearing Briefs. The American Arbitration Association anticipates that hearings could be held in December 1996. ITEM 5. OTHER INFORMATION On July 25, 1996, the Registrant's Board of Directors approved, subject to stockholder approval, the 1996 Equity Incentive Plan for the grant of incentive and nonqualified stock options to employees of the Registrant and established a reserve of 500,000 for issuance under the plan. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following is a list of Exhibits filed as part of this report: Exhibit 2 - None Exhibit 3(i) - Restated Certificate of Incorporation (filed as Exhibit 3(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). Exhibit 3(ii) - By-Laws (filed as Exhibit 3(ii) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). Exhibit 4 - None Exhibit 10 - None Exhibit 11 - None Exhibit 15 - Letter re unaudited interim financial information Exhibit 18 - None Exhibit 19 - None Exhibit 22 - None Exhibit 23 - None Exhibit 24 - None Exhibit 27 - Financial Data Schedule (electronic filing only) Exhibit 99 - None (b) Reports on Form 8-K No reports on Form 8-K were filed during the Second Quarter of 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AYDIN CORPORATION DATE August 13, 1996 /s/ Herbert Welber Herbert Welber, Controller DATE August 13, 1996 /s/ Robert A. Clancy Robert A. Clancy, Secretary EXHIBIT 15 Securities and Exchange Commission Washington, D.C. 20549 We have made a review of the condensed financial statements of Aydin Corporation and subsidiaries as of June 29, 1996, and for the three-month and six-month periods ended June 29, 1996 in accordance with standards established by the American Institute of Certified Public Accountants, and issued our report thereon dated August 7, 1996. We are aware that such financial statements and our above-mentioned report appearing in the Form 10-Q of Aydin Corporation for the quarter ended June 29, 1996 are being incorporated by reference in the Registration Statement Nos. 33-61537; 33-53549; 33-34863; 33-22016; 33-14284; 2-97645; 2-93603; 2-77623; 2-64093 and that such report pursuant to Rule 436(c) of the Securities Act of 1933 is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Grant Thornton LLP Philadelphia, Pennsylvania August 7, 1996 EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 This schedule contains summary financial information extracted from Second Quarter Report to Stockholders and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1996 JUN-29-1996 2,099 7,721 34,532 0 22,636 115,423 84,412 59,510 140,751 36,462 0 5,126 0 0 93,486 140,751 26,706 26,706 25,228 36,058 0 0 220 (9,352) (2,232) (7,120) 0 0 0 (7,024) (1.37) (1.37)
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